- Report says technology will underpin recovery post-COVID
- Notes countries are keen to develop market infrastructure
The 2021 edition of the African Financial Markets Index report by Absa and the Official Monetary and Financial Institutions Forum (OMFIF) say that African financial markets need to digitalise.
According to Absa and OMFIF, Botswana – whose economy has been ravaged by the COVID-19 – should tap into new innovations in sustainable finance and robust digital transformation.
In the financial markets report prepared by the two, 19 out of 23 countries in the index score lower than they did last year.
“This decline reflects more difficult market conditions, methodological changes and the inclusion of the environmental, social and governance indicators in the index,” said Absa and OMFIF in the report. “Despite the fall in scores, the few examples reveal an underlying deterioration in the policy, regulatory or developmental environment in any of the index countries.”
The index measures financial market development in 23 countries from across the African continent, including Botswana, focusing on economies with the most supportive environment for effective markets. The aim of the index is to show how economies can improve their market framework to bolster investor access and sustainable growth, and thus acts as benchmark for investors and policymakers.
The CEO of Corporate and Investment Banking at Absa, Charles Russon, said while some find it is disheartening to see the average score across the board drop, Africa is navigating an extremely tricky economic atmosphere characterised by COVID-19.
Russon pointed out that recovery from the COVID-19 pandemic has not been as straightforward as has been hoped and noted how this has had a large impact on the twin challenges the continent faces in reinvigorating financial markets post-pandemic while strengthening market infrastructure.
“However, we have seen a lot of positive progress in the countries’ efforts to upgrade market infrastructure and regulatory support through the development of the technology-based tools which will help future-proof Africa’s financial markets,” he said. “With countries using innovation to boost the local markets and build a broader investor base, there are further plenty of the reasons to be so hopeful about the future of Africa’s macroeconomic landscape.”
In the same report, the Chairman of OMFIF, David Marsh, pointed out that the index is evolving to stay relevant. Marsh said it is staying relevant in recognising the greater role that sustainability plays in market development and mitigating climate-related risks to the financial system, especially for African countries that are more vulnerable to the effects of environmental deterioration.
He added that innovations in sustainable finance and market infrastructure will be critical to ensuring that African markets remain competitive and future-proof as they recover from COVID-19.